Since mid-March, I have received endless letters from companies and funds I’m an investor in with their thoughts on the Covid crisis. One of the best was from Paul Kedrosky and Eric Norlin of SK Ventures (one of our Partner Fund investments).
Paul and Eric have given me permission to repost it here.
(First published May 15, 2020.)
Greetings-
To start, a few quotations as markers:
Then he heard the sand rumbling. Every Fremen knew the sound, could distinguish it immediately from the noises of worms or other desert life. Somewhere beneath him, the pre-spice mass had accumulated enough water and organic matter from the little makers, had reached the critical stage of wild growth. A gigantic bubble of carbon dioxide was forming deep in the sand, heaving upward in an enormous “blow” with a dust whirlpool at its center. It would exchange what had been formed deep in the sand for whatever lay on the surface.
– Frank Herbert, Dune
Chigurh: Just call it.
Shopkeeper: I didn’t put nothin up.
Chigurh: Yes you did. You’ve been putting it up your whole life. You just didn’t know it.
– Cormac McCarthy, No Country For Old Men
Unfortunately, most warning systems do not warn us that they can no longer warn us.
– Charles Perrow, Normal Accidents: Living with High Risk Technologies
Crises usually accelerate real trends in society and technology; they don’t create or refute them.
– Gary Kasparov
The opposite of fragile is something that actually gains from disorder.
– Nassim Taleb
“There are decades where nothing happens, and there are weeks where decades happen.” That is Lenin’s line, and it has felt right in every way and, likely, in almost every country in the world these last eight weeks. And people—investors, in particular—are falling all over themselves trying to understand what it means. We all want to try to explain something this wrenching, and to explain how it feels.
We want to believe that we just lived through weeks where decades happened, as Lenin said. Except he didn’t say that. And as near as quote investigators can tell, he never said anything like it: the first example of the phrase only appeared a few decades ago. It has caught on partly because it’s well put, but mostly because it captures how we feel about what it’s like to have something come exploding into our consciousness and force us out of our usual amniotic now. We want an explanation, and we want it to explain where things go from here.
The reality, however, is that wildness has always lurked just beneath the surface. A combination of willful blindness, homeostasis, wishful thinking, and luck have let us skate past the holes in modernity’s ice and pretend nothing lurks beneath it. We have been making bets on smooth, thick ice for decades, and we stopped noticing, even if cracks open anytime in the thickest ice. Pandemics are a crack in our preferred reality, but they are nothing new, even if many countries, like the US, lack recent experience with them, and so pandemics hit harder and longer.
So, what changes? Post-pandemic, in the short-run, and contrary to many, we think very little changes, at least very little that is materially different from what we thought before. Rather than being a break with the past, we think people’s desperation for a return to normalcy—shopping! travel! work!—creates immense pressure to return to the recent past faster than anyone expects. There is inherent human-driven homeostasis, an almost inexorable need to bring things back to where they were before.
We think the biggest short-term effect will be an acceleration of existing trends. More things will go in the cloud; more things will be virtualized; more things will happen at the edge; more buying, selling, and entertaining will happen online: and so on. These trends will simply speed up.
What about, you wonder, the bigger changes people chatter about, like the death of commuting to work, the end of globalization, the collapse of professional sports, and the like? Not so much. Sure, we will see a paroxysm of people fighting the last war, much like how we armored commercial airliner cockpits after 9/11. In that light, expect a continuing run on contract tracing apps, thermal scanning, work from home chatter, N95 mask technologies, and that sort of thing. But that is extrapolative and impermanent, armoring metaphorical cockpits, rather than thinking about what this episode has taught us about the wildness that lurks beneath modernity.
We think a more useful analysis must go deeper rather than being merely extrapolative—it must be a thick description of how people live and die. This virus has been, both literally and metaphorically, a disease of modernity. Why? Because It attacks via the vectors of modernity: trade linkages, obesity, diabetes, air travel, mass transportation, urban density, social media, etc. Understanding long-run change requires understanding where modernity itself is under threat, and whether those threats will lead to meaningful—and investable—change.
Fundamental to the changing landscape is the realization that people have been shown how brittle their home structure is. For example, surveys show that New York and Shanghai apartment dwellers are realizing that giving up a balcony for a little more floor space in their aeries made them prisoners of quarantine: most buyers newly say they wouldn’t make the same decision again. Similarly, people all over the world are realizing that “preppers” aren’t nuts (at least, in their prepping), that there is merit in thinking in terms of how much inventory of critical things—food, water, and yes, toilet paper—you have.
Sociologist of risk Charles Perrow, long ago warned against the catastrophic risks created by tight coupling in society. To Perrow, tight coupling was any complex system where changes in inputs ripped quickly to new and unpredictable outputs, without an opportunity for meaningful intervention. Perrow would have called this current episode a reminder of tight coupling’s risks, and a forced re-introduction to loose coupling—an attempt to make your life less easily whipsawed by abrupt changes in the world around you. In that light, we think people—and companies—will carry more inventory of everything, that the scarring experience here will turn us into proto-preppers, less willing to be caromed around by the vagaries of life. This a big change, one that will ripple through supply chains, housing, travel, technology, education, and health.
Speaking of health, life sciences is at an unremarked inflection. There is the real potential for multiple new and effective vaccine and drug delivery platforms to emerge at once, something that has never happened in the history of pharmaceuticals. We not only could see multiple vaccines arrive, which is appealing, but, more importantly in the long run, multiple new platforms for delivering drugs, which would vastly increase the drug arsenal, transform human health, and add vastly to societal wealth via decreasing aggregate cost of illness.
There is also, however, the real potential for multiple massive drug failures setting the industry back decades. Not just because current vaccine efforts could fail, proving that, in economist Robert Gordon’s terms, we are stuck on an undulating plateau of stalled (drug) innovation, but, more insidiously, that multiple billion-dollar vaccine programs could hit the market at once, all lose money, and re-convince pharma companies that vaccines are a terrible business, making the next pandemic even more therapeutically fraught.
Which will it be? We are optimists, and we strongly believe it will be the former, but it’s important to keep in mind that it is by no means a foregone conclusion.
Turning to other deeper changes, machine learning and big data are getting a real run-out here, and given our investments, we are glad to see it. In areas like medical imaging where machine learning continues to acquit itself well, throwing ample shade at human experts. This is overdue, important, and necessary.
On the other hand, naïve application of “big data” models is being shown for the dangerous practice that it is. Epidemiological models continue to acquit themselves poorly, in part because it’s hard, but also and importantly, to abstract away from this pandemic, because most interesting systems involve humans, and humans adapt and change in ways that work to make models’ predictions fail. As the old capital markets saying goes, “at inflections, markets move in whatever direction will cause the most pain to the most participants.” Big data models suffer no better fate at similar points, as people are belatedly discovering. We are hopeful that this new wisdom will lead to better, more flexible, more adaptive, and more useful analytical models, across finance, medicine, sports, risk, and so on.
Overall, we believe we will quickly return to a state much like where we were before recent events. It will be less different than many pundits expect. Under the surface, however, wildness will lurk—our society will merely be subcritical. This will be, of course, normal, not abnormal. Most of human history has been this way, unlike recent times, which were anomalously placid, a state that’s now ending as we return to subscriticality. We think that making this state visible and manageable will be one of the keys to investing moving forward.
There will be explosive economic, biological, and technological moves, much more explosive than in the recent past, in part because the ground has been cleared for them, but also because our new, over-excited society has collective scar tissue making it predisposed to jump sooner, further, and faster. This will lead to more rapid technology adoption, faster cycles, and great gains for investors willing to embrace the emergency of subcritical society. Platforms and tools that embrace this—enabling looser coupling, warning when legacy warning systems can’t warn, systems made stronger by volatility—are the emerging investments that we will be digging into as we move forward.
To summarize, here is our current state of thinking:
- In the short-run, less will change than people think
- In longer-run, we will see a complete rethinking of risk, slack, and societal coupling
- We are interested in investments that acknowledge, track, and even gain from the wildness and disorder lurking under the thin ice of a newly subcritical society.
So that I’m unambiguous about my perspective, #BlackLivesMatter.
Amy and I have been philanthropically supporting Progressive Public Policy and Social Justice Organizations for over 20 years. However, just providing financial support is not nearly enough, and I’ve decided to put much more time and energy into understanding and helping eliminate racial inequity. While I’m not sure that I have the right words (and am asking my Black friends to make sure I do), I believe that the correct term is being anti-racist.
I have no interest in virtue signaling. Since Monday, I’ve had several conversations where this phrase came up and it has been a confusing distraction in each conversation.
Stating one’s position is important. Backing it up with actions, consistently over a long period of time, is more important.
While I have tried to be an ally to many diverse communities over the past 20 years, especially around entrepreneurship, I haven’t focused nearly enough on Black entrepreneurs and investors. I regret that.
I decided that rather than issue specific statements about what I was going to do, I would use this week to learn. With everything I engage in, I believe in playing a long-term game, so rather than simply doing one thing today, I need to do many things over the next decade.
As a starting point, I’ve been having conversations with Black entrepreneurs and investors and asking one question.
“What are two initiatives you are involved in right now that I could put time and/or money into in support of you and your activities?”
If I haven’t talked to you and you are a Black entrepreneur or investor, if you have the energy or desire, I’m very interested in the answer to this question via a comment here, email, or @bfeld on Twitter.
On Wednesday 6/3 at 11am Energize Colorado will be launching our Mental Wellness initiative.
While we already have a Mental Health Resource section up on the Energize Colorado, we are starting a weekly webinar series called Wellness Wednesdays.
One of our goals with this initiative is to destigmatize mental health and support those in need of engaging in service during the Covid crisis. I’ve been talking about mental health as the third part of the Covid crisis since the end of March when I wrote the post The Three Crises.
I didn’t anticipate structural racism being a fourth crisis. But here we are.
Yesterday, a friend suggested that a middle-aged white person trying to constructively engage around structural racism feels like walking across lava. It’s dangerous and there are lots of ways that you can say or do something that goes very wrong, even if that wasn’t intended.
I’m aware of that, so rather than tell anyone what the solution is, I’m just going to engage, in the same way I’ve engaged with other issues like gender discrimination. Listen, learn, and do things in support of other leaders who are already involved. For example, in the case of gender, I began my journey in 2005 by supporting and learning from leaders like Lucy Sanders.
This morning, I’ve reached out to several black entrepreneurial leaders I know, including Rodney Sampson. My question to him is not “what should I do” but rather “what are you doing that I can get involved in and support right now.”
So, now we’ve got four crisis. Health. Economic. Mental Health. Structural Racism.
If you are involved in one of these, know that you are not alone.
And, if the mental health crisis is on your mind right now, join us Wednesday for our discussion on our the You are Not Alone webinar.
Dave Mayer pointed me at this video today. After struggling with how I was feeling all morning, during my run, and while I read the Sunday New York Times, this finally helped me put a framework around my feelings.
I’m angry. I’m sad. I’m confused. I’m appalled. I’m scared. I’m upset. And this is completely independent (and on top of) of all the challenges around the Covid crisis.
Seth wrote a great post on Wednesday titled Uncertainty.
Uncertainty provokes a kind of “fight or flight” response in the human brain. As we try to escape the idea of uncertainty, we analyze a situation in an attempt to make ourselves feel better. In other words, we worry in order to eliminate uncertainty and reassure ourselves. Frequent worry can lead to anxiety or depression and some individuals are more susceptible to it than others.
The amount of uncertainty, on all dimensions of our lives in America right now, are at an extreme high. And, then, on top of that, another white cop murders another black man, and our president once against behaves in a way that divides rather than unites.
I woke up to Gotham Gal’s post This Picture Says It All.
I’m lucky – I’m a middle-aged white guy with lots of resources. I’m stretched on a lot of dimensions on ways I’m trying to be helpful to others, but systemic racism is another category that I can’t, and don’t want to, be passive engaged with anymore.
As with my efforts on eliminating sexism and gender discrimination, I realize that I need to learn and participate as an advocate, rather than show up as “hi, I’m a white guy here to solve the problem.” So, I’m starting right now to understand systemic racism in America better and try to get involved in a constructive way to help eliminate it.
The punchline to Joanne Wilson’s post is “When this pandemic is over, we need to find a new path to leadership and a country that cares about all of us. We are a democracy, not a regime.”
I only have one minor modification – we can’t wait for the pandemic to be over.
On Wednesday, June 3rd, a team led by the COVID Tech Task Force is putting on the first of several free public conferences on the topic of Contact Tracing and Technology. Harvard’s Berkman Klein Center, NYU’s Alliance for Public Interest Technology, TechCrunch, Betaworks Studios, and Hangar are also part of organizing the effort.
I’ve gone extremely deep down the contact tracing and exposure notification rabbit hole. In February, I had never heard the phrase contact tracing. Today, I not only understand it well, I have a lot of perspective on the current state of contact tracing technology, along with emerging “new tech solutions” to contact tracing, and the incredible challenge of operationalizing these new technologies.
More importantly (and thankfully), several tech leaders motivated by Harper Reed recognized that the tech community that began talking about “contact tracing” in April was creating massive confusion given the long history of contact tracing. The tech folks (me included) tried to separate it from classical contact tracing by calling it “digital contact tracing.” But, this wasn’t really contact tracing at all and needed a different name. Harper labeled it Exposure Alerting which has finally found its true name as “Exposure Notification.”
Contact Tracing and Exposure Notification are different but related. And the way contact tracing is currently implemented is on a spectrum from legacy software systems to paper/whiteboard tracking. Not surprisingly, a number of tech companies and consulting firms have “contact tracing products” coming out. Some are excellent. Many either inadequate, not contact tracing, or mostly vaporware.
Two weeks ago, on the bi-monthly call that Fred Wilson and I do with several of the leaders of the Covid-19 Task Force, we suggested that they do a series of public events – as inclusive as they could – to help convene anyone who is interested around the issues of contact tracing, exposure alerting, health care, public policy, and technology. Fred wrote about this yesterday. We are both delighted that this has come together so quickly as the public forum on this is badly needed.
This event has several key speakers along with a bunch of demos of emerging products. It’ll be three hours long and live streamed on the web.
RSVP to attend. And, if you are working on a contact tracing or exposure notification application and want to be part of the demo mix, send me an email and I’ll get you connected.
I took an off the grid vacation last week. I needed it as I was pretty fried feeling on May 15th when I checked out.
Amy and I went … nowhere. We stayed at home. I slept late each day. I exercised. I read. I napped. We finished watching Breaking Bad. I played with my Glowforge and made a bunch of Ear Savers. I wrote a little, but not too much, on my next book (The Entrepreneur’s Weekly Nietzsche: A Book for Disruptors.)
I read two great memoirs, both by women I respect a lot.
- Hell and Other Destinations: A 21st-Century Memoir by Madeline Albright
- It’s About Damn Time: How to Turn Being Underestimated into Your Greatest Advantage by Arlan Hamilton
Madeline and Arlan are each incredible leaders, brave people, and women that I have learned a lot from. I’ve been fortunate to spend time with both of them and be involved in things that they created (in Madeline’s case, The Albright Institute; in Arlan’s case, Backstage Capital). I loved reading these books and recommend them for everyone, especially if you are interested in leadership.
I also read two books that are pertinent to this moment in time.
- The Great Influenza: The Story of the Deadliest Pandemic in History by John Barry
- The Great Crash 1929 by John Kenneth Galbraith
They were also each excellent and gave me useful perspective on our current reality, along with how our government responded during two other major crises (one health, one economic.)
It’s a beautiful day in Boulder today. I’m glad to be back from what was a much needed vacation.
Energize Colorado, working with Colorado’s Office of Economic Development and International Trade (OEDIT), has just released business templates that offer best practices, direction, and information on how businesses can restart operations safely and effectively.
These templates are based on OEDIT’s recommendations along with input from Kroger who has been a leader in evolving better practices as an essential business.
Next week, WorkBright and Energize Colorado are doing a four-part webinar series on Reopening Your Business.
- Part One: Let’s Keep COVID-19 Out of Your Workplace: Best practices in screening your workers and customers and how they need to be balanced with privacy and HIPAA concerns.
- Part Two: Let’s Not Pass it Along: Learn the underlying principles of social distancing to support creation of specific guidelines for your business and industry.
- Part Three: Let’s Plan for When it Does Happen: COVID-19 will come to virtually every business. Learn how to limit the impact and spread through your workforce.
- Part Four: Let’s Care for Our People: Special programs to check in frequently with workers and tools to respond to what you learn.
As businesses start opening up in Colorado, we are entering a very tricky phase of the Covid crisis. I appreciate the work that the 200+ volunteers at Energize Colorado are doing to help the companies with less than 500 employees navigate things.
We just announced our investment in Meru Health. If you recognize Meru Health, it’s because I wrote about it in January as part of my explanation of Freestyle’s Leadership on Mental Health. I highlighted what Josh Felser and his team at Freestyle were doing, which included underwriting 100% of the cost for two programs – Meru Health and Hoffman Institute, for all of their founders.
We got to know Kristian Ranta and his team at Meru Health through Josh. Freestyle is one of our 32 partner funds (where we are LPs) and most of our new direct investing activity is in conjunction with one of our partner funds.
Forbes wrote a detailed profile of the company and the investment in Foundry Group And Slack Are Backing A Virtual Therapy Startup That Raised $8.1 Million and we are excited to be part of Meru Health.
Over the past two months, I’ve been asked almost daily if “VCs are investing during the Covid crisis.” Generic questions like this are impossible to answer, as “VCs” are not a singular archetype (there are many types of VCs with different strategies, goals, personalities, and constraints.) So, I answer it from the frame of reference of what we are doing at Foundry Group.
In general, I think the best answers are examples.
For me, the Covid crisis started on March 11th. This was the first day I worked from home and haven’t left my house since then. We were planning to have our CEO Summit in Boulder on March 12th and 13th but cancelled it on March 9th. My parents were coming to Boulder on March 12th for a long weekend and to celebrate my dad’s 82nd birthday. My brother Daniel and I decided to cancel their trip and told them the night of March 11th. Bryan Leech at iBotta hosted the first “Denver Business Leaders” call the morning of March 11th. So, when I look back and mark this moment in history, it started for me on March 11th.
Since then, Foundry Group has closed three new investments.
- Fritz.Ai (partner fund: Uncork): March 25th
- Code Climate (partner fund: USV): May 11th
- Meru Health (partner fund: Freestyle): May 13th
We generally make about 10 new investments a year. While it’s not spaced out monthly (we don’t try to manage timing that granularly), if you look back to when we started Foundry Group in 2007 we’ve done a maximum of 14 new investments in a year and a minimum of 8 new investments.
When asked if we are investing, I answer “yes – on the same pace as we always have.” We have a deeply held belief that time diversity in investing matters, and the key is to keep the same pace of new investments no matter what is going on in the macro.
Techstars just released a 4-part original video series on entrepreneurship and mental health. I’m featured in one of the four short (< 10 minute) videos.
If there was ever a moment in time that challenged our individual and collective mental health, it’s the Covid crisis. When Techstars began working on this project last year, the focus was on increasing awareness of the issues around mental health and entrepreneurship. There was no anticipation of the additional pressure the Covid crisis would put on – well – everyone, everywhere. The timing goal was simply to release it during Mental Health Month 2020.
I’ve spoken regularly since 2013 about my struggles with anxiety and depression. As a result of a depressive episode that I had, I decided that I wanted to try to lower the stigma, especially in entrepreneurship, around mental health issues. I personally no longer separate between physical health and mental health – they are both part of our existence as humans, something everyone struggles with at some level, and something everyone can work on, if they want.
I’m officially DSM-5 300.3: Obsessive-Compulsive Disorder. If you know me, you know that I’m a counter, arranger, and checker with some washing (mostly hands) tossed in for good measure. My magic number is 3.
Since I became public about this in 2013, I’ve met many entrepreneurs who have opened up to me about their own struggles. In some cases, I’m the first person they’ve ever talked to because of the stigma associated with mental health issues, especially around leadership (e.g. a leader can’t show weakness). Some of the people I’ve developed relationships with around this are much more visible and successful than I am, yet, very few people know that they struggle with mental health issues. While that’s their choice, I’m glad they feel safe talking to me and I hope it’s at least a little bit helpful to them.
My wife Amy Batchelor is front and center in this video. When I listen to her talk about her experience with me around these issues, I realize how incredibly lucky I am to have a partner who has supported me from the very beginning. I know how challenging I can be at times, and I don’t think I’d be here, at this point in my life, without Amy.
I also highlight my first business partner Dave Jilk in the video. Dave is still one of my closest friends and probably knows me better than anyone on Planet Earth other than Amy and my brother Daniel. Dave’s support of me during my first depressive episode – when we were partners at Feld Technologies – was profound to me. And his support during my depressive episode in 2013 (which is a story I tell in the video) was incredible.
Many of the organizations I’m involved in are increasing their focus on mental health support. For example, one of the primary initiatives of Energize Colorado is mental health support for business people during the Covid crisis. And, there’s a lot more coming in my world.
Techstars – thanks for making this a priority for entrepreneurs. And to my fellow participants in the video series – Andrea Perdomo and Matthew Helt – thank you for being brave enough to tell your stories. Finally, Tishin Donkersley, thank you for the foresight, motivation, and endless efforts to make this project come to life.